RENTOKIL COMES CLEAN

It’s almost cruelly ironic that Rentokil Initial, a company dedicated to eradicating pests and cleaning toilets, is being so hard hit by the pandemic. It’s a specialist in handwashing, FFS!

That said, its approach to commercial difficulties, outlined in its trading update of 25 March 2020, is little short of exemplary.

It is an object lesson in frank and fair-minded shareholder communication that should be practised by all companies serious about #ESG. Rentokil says that “significant uncertainty exists around the impact of COVID-19,” and that the “situation is particularly complex due in part to the wide range in COVID-19 infection rates as well as differences in government action across the world.”

It clearly outlines the financial and operational implications and suggests it will probably use the UK government financial support mechanisms. It will also benefit from the Bank of England interest rate reductions.

But, and here’s the thing. The Rentokil board shows crystal clear understanding of the quid pro quos. “We have suspended our M&A programme and have also decided to suspend dividend payments for the time being, withdrawing therefore the final dividend proposed at the Preliminary results in February,” it writes. And, almost more commendably, it adds: “Pay cuts have been made across the Board and all senior management grades, with bonus schemes cancelled and the 2020 LTIP grant postponed.”

The share price collapse gives scant credit for the company’s approach to the communications aspect of sound governance. It was down 17 percent at 10.30am, London time.

It is not for directors to set the share price, however. Their job is to report accurately on the internal and external factors affecting the businesses while serving the owners with sound judgment.

It’s such an obvious point, really. But directors’ usual practice, observed over my 30 years as a financial journalist, is to layer bad news with sugar while needlessly gilding the good stuff; and act with myopic self-interest.

Hat-tip Rentokil Initial.

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